Jeffrey Saut's Closed-End Fund Picks For This Interest Rate Environment

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 |  Includes: FCT, IGR, RAP, RWF, RWX
by: Jeffrey Saut

Excerpt from Raymond James strategist Jeffrey Saut's latest essay:

...the Federal Reserve “follows” the bond market when setting the Fed Funds interest rate rather than “leading” it. If that historical precedent holds true, it suggests the Fed is unlikely to lower interest rates anytime soon. Ladies and gentlemen, to a Wall Street community imbibed with lower interest rates, steady interest rates -- or worse yet higher interest rates -- would be a shock. Not only would higher interest rates have negative implication for the economy, but for our stock market regression models, P/E ratios, and our weaker U.S. dollar strategy. So what are we to do?

Well, for the past few years we have recommended that investment portfolios have a position in First Trust/Four Corners Senior Floating Rate Income Trust II (NYSE:FCT) since it benefits from higher interest rates... As a hedge to FCT (in the event of lower interest rates), investors should consider an equal dollar-weighting in international REITs... Closed-end funds playing to this international REIT theme include: 6%-yielding INGClarion (NYSE:IGR), 5%-yielding C&S Worldwide (RWF), RMR Asia Pacific (NYSEMKT:RAP), and the streetTRACKS DJWilshire International Real Estate ETF (NYSEARCA:RWX).